LCI Industries (LCII) reports quarterly earnings November 1. Investors expect revenue of $608.8 million and EPS of $1.33. The revenue estimate implies 10% growth Y/Y, yet a double-digit decline sequentially. Investors should focus on the following key items.

Slowing Top Line Growth

LCII supplies a broad array of engineered components for leading original equipment manufacturers (“OEMs”) in the recreational and industrial product markets. Those markets consist of recreational vehicles (“RVS”) and adjacent industries, including buses, trailers used for hauling, trucks, boats, trains and manufactured homes. The company also supplies components to the aftermarkets of these industries, selling through retailers, wholesalers and service centers.

In Q2 2018 the company’s total revenue of $684 million grew 25% Y/Y. Sales of components for travel trailer and fifth-wheel RVs outperformed industry-wide wholesale shipments for the segment due to market share gains from new products and customer penetration. Sales growth of components for Motorhomes outstripped industry shipments primarily due to acquisitions completed in 2018 and 2017. LCII’s average content per RV for travel trailers and fifth-wheel RVs and Motorhomes was up 10% and 18%, respectively. This is another measure of the company’s increase in market share.

Sales to Adjacent Industries increased primarily on the strength of acquisitions completed over the past two years and from market share gains. Total revenue from RV OEMs and Adjacent industries grew 23% Y/Y. They now represent 90% of LCII’s total revenue. The question remains, “What happens to top line growth once acquisitions subside?” Read now:

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